A series of recent articles all but proclaim the end of the daily deals market. As a representative example, the following appeared in the NY Times over the weekend: Merchants and Shoppers Sour on Daily Deal Sites. It’s a catalog of discontent with daily deals.
The industry took off and grew so quickly that many of its fundamental challenges weren’t properly addressed:
- Businesses didn’t learn how to structure and service deals properly
- Companies didn’t properly educate SMBs about fulfillment challenges
- Consumers frequently had mixed or mediocre experiences because many SMBs were not properly staffed or in some cases offered half-hearted fulfillment and service
- Too few barriers to entry enabled too many deal vendors to appear and created chaos for both SMBs and consumers, as email boxes filled up a relentless barrage of what might be called “deal spam”
On the business side Groupon’s stock has taken a beating as revenues haven’t grown fast enough to satisfy investors and doubts about the company have grown. Groupon is the bellwether so the outlook for the entire segment is tied to Groupon’s perceived health and performance.
All it takes is one or two negative experiences with daily deals and consumers will stop buying. The same is true for local merchants.
Here’s the thing though: coupons/deals/offers have been around for years and years. They will survive whatever happens to Groupon, LivingSocial et al. Consumers love and will continue to love saving money. Deals aren’t going anywhere.
The phenomenon of the “daily deal” may well now be in decline. But there’s no more reliable way to garner consumer interest and response to ads than to offer a discount or promotion. For example, the recent xAd-Telmetrics “mobile consumer path to purchase” study identified the following top three reasons consumers responded to mobile ads:
- They were locally relevant
- There was an offer/coupon or promotion
- The ad featured a known brand
There are many more such examples I could bring forward to illustrate the efficacy of deals or coupons. So while “daily deals” may fade as a specific commerce category the larger notion of discounts and coupons will not. Yet the current manifestation of daily deals is also likely to survive, albeit in somewhat diminished form.
Do you agree or disagree? What do you think happens to the “daily deals” segment? Do we have a much smaller group of companies carrying on in the future or does the entire daily deals model disappear?
August 21st, 2012 at 12:38 pm
[...] part of its strategy may lay ahead.Daily Deals Are Dead, Long Live Coupons and Discounts (Screenwerk) Greg Sterling: Here’s the thing about the daily deal industry: coupons/deals/offers have been [...]
August 21st, 2012 at 12:39 pm
Couldnt agree more, Greg. This isnt mesnt tk be a shameless self promotion but its going to sound like it because you spelled out the basis for our business – consumers are connecting with businesses they love online, consumers respond to promotions and business owners are strapped for time. The logical solution? A simple, easy to use tool that allows you to publish and sell custom promotions to a targeted online audience that can buy them online and redeem in store. Voila: Privy.
August 21st, 2012 at 2:30 pm
Purchasing a “deal” to redeem at a later date is part of the prob. Consumers are instant creatures. When they go out to eat, shop, get their oil changed etc…they all would be interested in a deal that they do NOT buy but rather gets applied to their bill. Yes, thats called a coupon, a certificate, an offer whatever. Enough of some third party selling a good or service for a merchant and then deciding when to give that merchant their money. The models smells. I called groupon’s failure from day one. It is bad biz for the smb.
August 21st, 2012 at 3:23 pm
In some categories the “delay” between purchase and redemption isn’t a big problem. The problem is the uncertainty about whether there’s a “bait and switch’ or whether you’re going to have access to the inventory (massages, hotel rooms, whatever). Once you’re burned by the system or an SMB who screws up fulfillment you’re reluctant to buy similar deals.
August 21st, 2012 at 5:39 pm
So frustrating… when we launched Pushkart http://pushkart.com we were entirely focused on merchant education and actually built out an algorithm that helped them to better structure deals but at the time all they were interested in was getting people in to hoard deals… We had addressed all the barriers to entry as well as catered to making sure the merchant were not only protected but that they actually made money and got exposure. http://vimeo.com/16263485